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Mullen Group Ltd. Reports Second Quarter Financial Results

OKOTOKS, AB , July 24, 2019 /CNW/ - (MTL.TO) Mullen Group Ltd. ("Mullen Group", "We", "Our" and/or the "Corporation"), one of Canada's largest suppliers of trucking and logistics services as well as specialized transportation services to the oil and natural gas industry in Canada , today reported its financial and operating results for the period ended June 30, 2019 , with comparisons to the same period last year. Full details of our results may be found within our Second Quarter Interim Report, which is available on SEDAR at www.sedar.com or on our website at www.mullen-group.com.

"Our team continues to find new and creative ways to find operational efficiencies. They have developed a plan to reduce or eliminate redundancies and streamline processes, objectives that can only be achieved through innovation, technology and working alongside customers. From my perspective this is particularly encouraging given the state of the two sectors of the economy we serve, which I describe as extremely competitive. The reality is that there are times when markets simply do not grow. But we do not sit by idly and wait for better days. We adjust our priorities, focus on costs, find those elusive productivity improvements and search for strategic acquisitions to generate growth," commented Mr. Murray K. Mullen , Chairman and Chief Executive Officer.

"The Trucking/Logistics segment had another strong quarter despite the headwinds associated with the slow growth Canadian economy along with a quarter of very soft demand for truckload services. From my vantage point it appears that consumer spending remains strong, which drives our less-than-truckload and final mile delivery business. In contrast capital investment, in areas such as infrastructure and major projects, remains hampered by regulatory delays and a lack of investor conviction. This directly impacts our truckload and specialized business. In western Canada the oil and natural gas industry continues to struggle with a combination of low commodity pricing and a lack of access to new markets. This situation is clearly forcing nearly every producer to curtail capital investment including drilling programs. It is under this scenario that only a well thought-out acquisition strategy can minimize the negative impacts of the industry slowdown. This is precisely what we did last year and why our Oilfield Services segment results improved year over year. All in all a very good quarter for our organization."

"For the balance of the year all indicators point to a continuation of the current trends although recent announcements regarding Canadian LNG project sanctioning are clearly positive. In addition, with the recent successful closing of the convertible unsecured subordinated debentures we have the capital and ample liquidity to pursue acquisitions," added Mr. Mullen.

Key financial highlights for the second quarter of 2019 with comparison to 2018 are as follows:

HIGHLIGHTS

(unaudited)

($ millions)

Three month periods ended

June 30

2019

2018

Change

$

$

%

Revenue

Trucking/Logistics

219.6

219.4

0.1

Oilfield Services

99.8

76.7

30.1

Corporate and intersegment eliminations

(0.4)

(0.4)

-

Total Revenue

319.0

295.7

7.9

Operating income before depreciation and amortization (1)

Trucking/Logistics

36.2

33.4

8.4

Oilfield Services

16.9

11.9

42.0

Corporate

(1.7)

(1.0)

-

Total Operating income before depreciation and amortization (1)

51.4

44.3

16.0

(1) Refer to notes section of Summary

Mullen Group operates a diversified business model combined with a highly adaptable and variable cost structure. The financial results for the three month period ended June 30, 2019 , are as follows:

generated consolidated revenue of $319.0 million , an increase of $23.3 million , or 7.9 percent, as compared to $295.7 million in 2018 due to:

earned consolidated operating income before depreciation and amortization ("OIBDA") of $51.4 million , an increase of $7.1 million as compared to $44.3 million in 2018 due to:

Second Quarter Financial Results

Revenue increased by $23.3 million, or 7.9 percent, to $319.0 million and is summarized as follows:

OIBDA increased by $7.1 million , or 16.0 percent, to $51.4 million and is summarized as follows:

Net income increased by $17.8 million to $31.7 million , or $0.30 per Common Share due to:

A summary of Mullen Group's results for the three and six month periods ended June 30, 2019 , and 2018 are as follows:

SUMMARY

(unaudited)

($ millions, except per share amounts)

Three month periods ended

June 30

Six month periods ended

June 30

2019

2018

Change

2019

2018

Change

$

$

%

$

$

%

Revenue

319.0

295.7

7.9

638.6

587.8

8.6

Operating income before depreciation and

51.4

44.3

16.0

95.4

82.2

16.1

amortization(1)

Net foreign exchange (gain) loss

(6.8)

1.9

(457.9)

(7.9)

8.1

(197.5)

Decrease (increase) in fair value of investments

0.1

(0.4)

(125.0)

-

1.1

(100.0)

Net income

31.7

13.9

128.1

43.3

15.4

181.2

Net Income - adjusted(2)

15.5

15.3

1.3

26.1

24.6

6.1

Earnings per share(3)

0.30

0.13

130.8

0.41

0.15

173.3

Earnings per share - adjusted(2)

0.15

0.15

-

0.25

0.24

4.2

Net cash from operating activities

45.7

35.9

27.3

69.9

57.7

21.1

Net cash from operating activities per share(3)

0.44

0.35

25.7

0.67

0.56

19.6

Cash dividends declared per Common Share

0.15

0.15

-

0.30

0.30

-

Notes:

(1)

Operating income before depreciation and amortization ("OIBDA") is defined as net income before depreciation of right-of-use assets and of property, plant and equipment, amortization of intangible assets, finance costs, net foreign exchange gains and losses, other (income) expense and income taxes.

(2)

Net income - adjusted and earnings per share - adjusted are calculated by adjusting net income and basic earnings per share by the amount of any net foreign exchange gains and losses and the change in fair value of investments.

(3)

Earnings per share and net cash from operating activities per share are calculated based on the weighted average number of Common Shares outstanding for the period.

Non-GAAP Terms - Mullen Group reports on certain financial performance measures that are described and presented in order to provide shareholders and potential investors with additional measures to evaluate Mullen Group's ability to fund its operations and information regarding its liquidity. In addition, these measures are used by management in its evaluation of performance. These financial performance measures ("Non-GAAP Terms") are not recognized financial terms under Canadian generally accepted accounting principles ("Canadian GAAP"). For publicly accountable enterprises, such as Mullen Group, Canadian GAAP is governed by principles based on IFRS and interpretations of IFRIC. Management believes these Non-GAAP Terms are useful supplemental measures. These Non-GAAP Terms do not have standardized meanings and may not be comparable to similar measures presented by other entities. Specifically, operating margin, net income - adjusted and earnings per share - adjusted are not recognized terms under IFRS and do not have standardized meanings prescribed by IFRS. Management believes these measures are useful supplemental measures. Investors should be cautioned that these indicators should not replace net income and earnings per share as an indicator of performance.

Financial Position

The following summarizes our financial position as at June 30, 2019 , along with some of the key changes that occurred during the second quarter of 2019:

Increased the amount available on our Bank Credit Facility to $150.0 million (no amounts were drawn as at June 30, 2019 ).

Exited the second quarter with working capital of $248.2 million , which included $84.8 million of cash and cash equivalents by virtue of raising $125.0 million of convertible unsecured subordinated debentures (net proceeds of $119.8 million ).

Total net debt decreased by $41.6 million to $477.5 million ( March 31, 2019 - $519.1 million ) due to repaying the $35.3 million outstanding on the Bank Credit Facility and from the $6.3 million foreign exchange gain on our U.S. $229.0 million debt.

The value of our cross-currency swaps increased by $0.5 million to $37.4 million ( March 31, 2019 - $36.9 million ), which swaps the principal portion of our U.S. $229.0 million debt to a Canadian currency equivalent of $254.1 million .

About Mullen Group Ltd.

Mullen Group is a company that owns a network of independently operated businesses. The Corporation is recognized as one of the leading suppliers of trucking and logistics services in Canada and provides a wide range of specialized transportation and related services to the oil and natural gas industry in western Canada - two sectors of the economy in which Mullen Group has strong business relationships and industry leadership. The corporate office provides the capital and financial expertise, legal support, technology and systems support, shared services and strategic planning to its independent businesses.

Mullen Group is a publicly traded corporation listed on the Toronto Stock Exchange under the symbol "MTL". Additional information is available on our website at www.mullen-group.com or on SEDAR at www.sedar.com.

Disclaimer

This news release may contain forward-looking statements that are subject to risk factors associated with the oil and natural gas business and the overall economy. Mullen Group believes that the expectations reflected in this news release are reasonable, but results may be affected by a variety of variables. The forward-looking information contained herein is made as of the date of this news release and Mullen Group disclaims any intent or obligation to update publicly any such forward-looking information, whether as a result of new information, future events or results or otherwise, other than as required by applicable Canadian securities laws. Mullen Group relies on litigation protection for "forward-looking" statements. Additional information regarding the forward-looking statements is found on pages 1, 55 and 56 of Mullen Group's Management's Discussion and Analysis.